21.3 C
New York
Wednesday, August 17, 2022


Testy Tuesday Morning

After a dull day yesterday and a very disappointing speech by Bush, we’re up in pre-markets.

We’re still looking to make the minimum levels we were looking for yesterday so it’s going to be difficult to impress us with a pre-market flurry, most likely bought on by Paulson’s scheduled spot on CNBC this morning, which just ended and amounted to the same nothing our President gave us yesterday.

I made my macro statements in my review of Tom’s State of the Market Review this morning so we can skip right along to Asia, where things were flat(ish) this morning and there was little news to drive the markets.  Chinese and Japanese banks did very well but airlines took a hit as China Eastern rejected an offer from Singapore Airlines as well as an offer from Air China.  In order to make sure those planes don’t get too crowded, China has been cracking down on thier one-child policy, revoking Communist Party memberships from violators.   As China’s economy booms and incomes surge, especially in urban areas, the Communist leadership has become concerned that special treatment of the rich and powerful could aggravate mounting social tensions and shake its grip on power. 

Europe is trading up about a point this morning led by mining stocks as Bush’s comments yesterday sent gold flying to new record levels.  Confidence is way down in Europe but, as I mentioned yesterday, their leaders are open about national problems and acceptance is an important part of the grieving process.  US investors, especially homeowners, are still deep in denial and that is a far more dangerous state.  UK retail stores turned in their worst holiday performance since 2004, German auto sales dropped 9.2% for the year – the worst since 1990 and EADS dropped ANOTHER 7.5% on a DB downgrade.  Considering all that, Europe is holding up very well!

In addition to Bush giving us nothing substantial yesterday and Paulson coming on CNBC and talking about fishing this morning, other things that scare me are Jim Cayne getting dumped at BSC and KBH reporting a 31% drop in revenues as 58% of the orders they took were canceled last quarter (something we predicted at the time).  

Fed Gov. Plosser says we may not get cuts but we WILL get more inflation:  "Providing liquidity to the market does not solve the fundamental problems of repricing risky assets and assessing counterparty risks," Mr. Plosser said, adding "write-downs play a necessary and important role in restoring the health of financial markets. Ultimately, the markets will have to sort it out."   Mr. Plosser did add that the Fed’s Term Auction Facility, which has thus far auctioned off $40 billion in liquidity to markets, has been thus far "successful."

I was very close to throwing in the towel yesterday as a weekend of looking at charts and my overall market concerns were already starting to get to me.  I had said that oil hitting $100 was the last straw last Thursday but Bush had me buying gold bars yesterday with his 2pm "solution" for the economy which was, SURPRISE!, more tax cuts.  My sole hope right now rests on two very silly things.  One, that Cramer and his pals are manipulating the markets and this sell-off is forced (as he discusses in detail in this video) and two, that expectations are set so low at this point that it will be hard not to exceed them which should give us, at least, somewhat of a bounce into earnings season.

After that, it’s a whole new ballgame!



Notify of
Inline Feedbacks
View all comments

DM- thanks. Let’s try to email that link around to every one and scare the crap out the bears so I can pull my crushed apples out of this mess!

Let’s do it now!!!

Seriously, now. I’m hoping the whole goddamn MSM goes crazy with that story.

win- we need a producer at CNBC to get that on the agenda as “news”

I’ve only been trading options for 2 years, but these charts are scary. I’m selling my Apr APPL, T, AMGN calls into tomorrow’s opening Hillary/McCain rally and just playing Qubes/DIA calls & puts based mainly on Optraders 5dma. I guess I’m just a newbie, but I don’t want to drink anymore APPL cider.

DM-I like the view but that’s a bit overdrawn in my view. A bit too bearish I think but maybe it will restore confidence that everything that can be done will be done.

vbat-No need to apologize for questions, just no stupid questions. The vix is a measure of volatility. However, the price (just as in options/bonds/everything) is decided by traders making bets one way or the other. I haven’t looked but it sounds like traders who used to trade it don’t have cash or are putting their money elsewhere or it’s more or less a foregone conclusion at this point that volatility is up. More or less, it sounds like there aren’t many using it to buy protection to drive up the prices. If that isn’t the right answer, i’ll need some extra help from the sidelines (Opt, Film, Phil, DM, and the rest)

Orion-That’s what i’ve been doing since this began in August. I haven’t held a call longer than two weeks since then. Even then i’m usually hedged and, somewhat to my disbelief, all my hedges have paid off.

great article.
did you know there is a PPT blog? it’s not very good, but it exists. http://www.plungeprotectionteam.com

very good guidance, as always. thanks.

opt- forgive my gropings:

AAPL cherts-
100dMA is 166ish and climbing about 0.40/day
AAPL has bounced off 100dMA on NOV, AUG, early ’07
AAPL is down >15% in the last 7 trading days (only 2 green bars)
similar things can b said for the entire market

macworld now 7 days away
-jobs is a real showman/saleman,
earnings about 3 weeks away,
-avg EPS is 1.58- they likely will approach 2.00 (open question: who wants to discuss that?)
trading at 34x trailing EPS (27x forward)
(these multiples will b too high b/c of earnings beats alone)
the market as whole is very suspect
FOMC meeting is a possible catalyst- due to the extreme recent trend it’s a likely positive catalyst, in my opinion

owning AAPL is very painful
it’s the falling knife u r not supposed to attempt to catch
one would think the market as whole is really freaked out,
-but VIX is only begining to reflect this & put/call ratio needs to attempt 2.0 to b confirmed bottom selling (in my book)

election season is beginning, so bush has likely saved economic stimulus to provide momentum for repubs
FOMC meets at the end of JAN- likely positive catalyst

a bounce is imminent on the 1-2 week time frame or whenever AAPL graces it’s 100dMA
-bounce likely to b violent- maybe up $25 in 2 days, at least $15
– and if we get in at low intrada, then it will b xanadu
(7x ur $$, like last year when JAN 90s were 0.95 during keynote and could b sold at least as high as 7.00)

yet, far OTM JAN options seem rather f%$ked, real nice and proper.
so owners of these contracts will bank the most $$$ (oil barron-like profits) if holding them during this imminent, highly probable and violent bounce.

as the market itself begins to recover and at least attempt a counter trend rally

FEB & later contracts will b exposed to all possible catalyst (MWSF, earnings, FOMC, bush policy, market reversion to the mean)- but with less oomph.


surprise surprise … Hillary not dead.

very surprising result, no ?

Does that mean NH is against “change” ? (kidding people, ok ?)

they’re announcing clinton as the democratic victor of the new hampshire primary. mccain leads the republicans. http://www.cnn.com/ELECTION/2008/primaries/results/state/#NH
i expect the markets will like these results.

windy- futures r turning up

I HOPE that the market will like these results and CHANGE its recent direction.


Mattress Play clarifications: Thanks for the links that were provided earlier, plus the additional comments, Phil.

I did very well on these today, and I get the idea, and have re-read all the articles I could find again, but is there one good base document that has it all in a concise format. This is what I think I understand and where I’m still lost.

1) Start with a base mattress approximately equal to 1 contract for every thousand dollars you want to protect. The DIA Put should be 30-45 days out to something in the $2-$3 range.

2) Roll up the position every dollar you can whenever the roll is less than .35 cents.

3) Entering: The time to enter initial DIA PUT’s is not on days like today, but after the market goes up.

???4) Adding additional layers. This is where it gets confusing. When I re-read the original article, it talked about “Adding additional mattresses the farther you fall”. But this seems to be in contradiction to #2-3 above which says to enter on UP days (not down) roll up as the market goes UP (not down).

???5) Guidelines for when to cover half vs triggering the trailing stops. Certainly I’ve been on this site long enough to know that when I’m in doubt, I should cover half or set stops on my profits. But is that all there is to it – just use your own judgement to sell half or cover half when in doubt?

6) Any guidelines for people with full time jobs that would help them set automatic “sell-half”, “cover-half”, “roll” triggers. Or is the DIA mattress play a better hedge for day-trader market-watcher types? And perhaps full time job people should use an alternate hedging approach – such as LTP covered plays only?

7,8,9..) Any additional guidelines I missed?

Well, I’m headed out for a bit but would appreciate reading anyone’s comments when I get back – if you are still up.

I may re-post tomorrow as well if I don’t see any comments, as I think this is really key material for discussion – especially on days like today.



SPY futures > 1400

have they always made concession speeches with the results of each state’s primaries? it seems a bit much to me.

where do u track futures?

windy- futures on tos

bloomberg.com has delayed futures

I’m glad so many new traders have joined up. I just hope that everyone is taking the time to understand the trade prior to making it, in other words stop following blindly.

Phil: Uses a variety of techniques but leans toward calenders and similar plays like them. Great technique but not good for most of the optionable stocks. He has an uncanny ability to find the right buys/sells at the right price at a very fast pace. I have followed some of his trades but many I don’t simply because I don’t have the time to figure out the pricing he’s using and why. Those that I do follow I make sure I understand why and where it should be going and when and where I should be rolling or exiting. One can tell that many people here follow his trades without blinking an eye or understanding the trade, but what if Phil makes the trade, you follow and then god forbid he has something else happen in his life and he’s not here for a few days? Now it’s mass panic and confusion. Some people don’t like paper trading because it’s not real money hence it pulls the emotion out of the trade (which is huuuge). But, if you can go to the charts and look at his recommendations, check the prices, papertrade it and get an understanding of how and why he came to those conclusions, you’ll be better off in the long run. The hardest part of papertrading is sticking to your stops because it’s not really money…but you must force yourself to do so.

Optrader. Another great trader but with techniques altogether different. His 5 MA further explained in the K1 project works for him and others and works well. But don’t count on him to explain all of his entries and exits for reasons explained above. I use it from time to time on Q’s but that’s about it. Not because I don’t like his trades but because I don’t have the time during the trading day to actually look at the same charts that he’s looking at and see the same things he sees. That obviously takes time and practice. So when he mentions a trade I suggest going to the same charts that he uses (it’s explained in the K1 project) and see what he sees and do that until you understand it. Some of his trades move fast so it’s best to paper practice first, that way you can make the trade right away and then go to the charts and fully understand the rationale behind it. There should come a time when you both enter a trade and you say “hey, it turned I’m exiting the trade” and he’ll write back “so am I, great job!”. Of course you should have an exit strategy before the trade is made but you get the point.

Of course we pretty much all trade calenders, condors, butterflies and such. Some of us trend and countertrend trade and others buy/sell at support/resistance. The key is to learn a couple techniques, master them, then come back learn more and master those. Sooner or later you’ll find what you like, are really good at and can teach to the group.

There are many great minds on this board even though I’ve only mentioned two, stick around and you’ll see what I mean. I’ve been a part of Investment Clubs, Investment Groups and have even had the privaledge to lead these groups of talented investors/traders. This is, on a whole, one of the greatest collection of thinking people that I’ve seen. Not necessarily traders, but minds that can come up with ideas and follow those ideas with rational thought.

Lastly, since my late night rambling is almost up, read read read. I can give you some good titles if you want, there are many great ones out there. Personnaly I like ‘High Probability Trading’ by Marcel Link, ‘Think Your Way To Financial Freedom’ by Van Tharp, ‘Think Grow Rich the origianl version restored and revised’ by Napolean Hill, and I also like the Turtle books. These are just a few and others may have even better titles if you ask them.

I’m done rambling now…good night America.

“There are three types of people in this world: those who make things happen, those who watch things happen and those who wonder what happened.” – Mary Kay Ash

nikkei- openned down 300, has been rallying since before primary results- now down only 25

my comments on the speeches that i listened to:
edwards was awful, could not listen to it through to the end.
obama is a superb speaker, his greatest asset by far.
clinton is very practiced, well-spoken. she often seems slightly disconnected, but towards the end she reinhabited her body, or her voice, became more real and personable.

cool, thanks.

Thanks for your input/guidance – as always, you guys make this an extra ordinary site.
I had noticed this(what you mentioned above)a ew weeks ago when you published your portfolio holdings. Since then and the time Phil emphasized BALANCE, I have tried to balance out my accts. However, I am trying to get into all cash in prep for me to follow the new 25KP to the T. In the process I have liquidated everything except AAPL, GOOG, RIMM which happen to be naked at the time and I had bought DIA puts especially after reading Tom2oc’s articles – so I am not in as bad a situation as I could have been.
The reason I asked the above question was because Phil had mentioned about the fulcrum in his portfolio back when he was talking about balance and I sure would like to learn that part and would appreciate help rom anyone.
Thanks again!

nikkei- now up 20- that’s a 320 reversal from the open

1 11 12 13

Stay Connected


Latest Articles

Would love your thoughts, please comment.x